Hormuz Shipping Crisis Raises Global Energy Fears: Could India Face Economic Fallout?

The sudden slowdown of oil tanker traffic through the Strait of Hormuz has triggered global concern, with analysts warning that the disruption could reshape energy markets and impact countries heavily dependent on Gulf energy supplies, including India.

Energy economist Anas Alhajji has described the current situation as unprecedented, saying global energy markets are entering uncertain territory as shipping companies pull back from the region.

Insurance Shock Freezes Tanker Movement

The disruption did not begin with a direct military attack on ships. Instead, the crisis was triggered when several major international insurers withdrew war risk coverage for vessels operating in the Strait of Hormuz. In some cases, premiums rose so sharply that shipowners stopped sending tankers through the waterway.

According to Alhajji, the decision by insurers effectively halted shipping activity in one of the world’s most critical energy corridors.

“This situation is unlike anything we have seen in recent decades,” he said, adding that the shock has affected markets across multiple sectors including crude oil, LNG, natural gas liquids, fertilizers, methanol and other petroleum products.

A Critical Global Energy Route

The Strait of Hormuz connects the Persian Gulf with global markets and is considered one of the most important chokepoints in the global energy system. Around 15–20% of the world’s oil supply and nearly 20% of global LNG shipments pass through this narrow passage.

Any disruption in tanker movement therefore has immediate consequences for global energy prices and supply chains.

Questions Around Washington’s Response

What has raised questions among analysts is the relatively quiet response from the United States.

Despite frequently criticizing high energy prices, US President Donald Trump has made few public statements regarding the insurance crisis. Some experts believe this silence could indicate a broader geopolitical strategy linked to tensions with Iran.

Trump has previously suggested that the US Navy could escort oil and LNG tankers through the Strait of Hormuz if the situation deteriorates. Such a move would resemble operations during the 1980s Iran–Iraq war, when American naval forces protected Gulf oil shipments.

If implemented, naval escorts could reduce the risk of attacks but would also raise transportation costs, insurance premiums and logistical delays, increasing the overall price of Gulf energy exports.

Analysts say this could indirectly benefit US oil and LNG exports, making them more competitive in global markets.

Potential Impact on India

Countries heavily dependent on Gulf energy supplies are already feeling the ripple effects.

India, for instance, relies on the Strait of Hormuz for a significant portion of its energy imports. Roughly 25% of India’s fertilizer imports pass through the route, and the country’s fertilizer sector depends heavily on natural gas and energy supplies from Gulf producers.

With LNG shipments, particularly from Qatar, facing uncertainty, Indian authorities have reportedly asked fertilizer companies to reduce natural gas consumption.

The timing is critical because the disruption is unfolding just before India’s major agricultural planting season. Reduced fertilizer production could impact crop yields and increase the need for food imports.

Some analysts believe this scenario could indirectly benefit agricultural exporters such as the United States.

Broader Global Consequences

The impact of the disruption is already spreading beyond India. Countries like Bangladesh have begun reducing electricity supply due to LNG shortages, while Egypt and Jordan have faced interruptions in gas deliveries.

Meanwhile, several Gulf producers have scaled back production of oil, LNG and petrochemicals amid the uncertainty.

Oil Prices Could Surge

Energy markets are now bracing for volatility.

Investment bank Citigroup expects Brent crude prices to remain between $80 and $90 per barrel if tensions ease within the next two weeks. However, Goldman Sachs estimates that current prices already include a geopolitical premium of around $18 per barrel due to conflict risks.

More severe scenarios could push prices even higher.

Consultancy Wood Mackenzie warns that oil prices could climb above $100 per barrel if tanker traffic through the Strait of Hormuz does not return to normal quickly.

Global Economic Risks

According to Alhajji, the stakes extend far beyond oil prices.

If the shipping insurance crisis continues and geopolitical tensions remain unresolved, the disruption could trigger a wider economic and political shock across global markets.

“Trade flows are shifting rapidly,” he warned. “If this situation persists, the world could face a severe economic crisis with consequences that reach far beyond energy markets.”